100% FDI in local airlines would be threat to national security: IB

Concerns were raised during a meeting chaired by Home Secretary Rajiv Mehrishi which was attended by senior officials from the civil aviation ministry and the IB. The meeting, held last month, was convened to discuss issues related to proposed amendments to the Aircraft Rules, 1937.

The amendments are required to operationalise the framework for allowing foreign non-airline players to own up to 100 per cent stake in domestic carriers. While the liberalised FDI policy was announced last year, it can be implemented only after putting in place the relevant rules.

According to the source, who is not authorised to speak to the media, the IB is of the view that foreign players should not be allowed to have 100 per cent stake in domestic airlines as aviation is a "highly sensitive sector".

During the meeting, the IB also submitted that even developed countries like the US and Canada have permitted foreign entities to have only up to 25 per cent stake in their respective domestic carriers.

Another concern raised was on the grounds that many airports having commercial operations are with the defence establishment. Allowing foreign players to fully own domestic carriers might pose threat to national security, especially during the times of conflict, the source said.

The IB has also suggested that the existing substantial ownership and effective control requirement should be retained. Under this norm, substantial ownership and effective control of domestic airlines should be vested only with Indian nationals.

A query sent to a civil aviation ministry spokesperson seeking comments for the story did not elicit any response.

Another meeting on making amendments to the rules to operationalise the framework for 100 per cent FDI in local airlines is likely to be held this week, the source said.

The Federation of Indian Airlines (FIA) has been opposing the move to permit overseas players to establish carriers in the country. Jet Airways, SpiceJet, IndiGo and GoAir are part of the FIA.

At present, at least three domestic carriers have foreign airlines as partners. They are Jet Airways, Vistara and AirAsia India.

In Jet Airways, Abu Dhabi-based Etihad Airways has 24 per cent stake, while in Vistara, Singapore Airlines holds 49 per cent shareholding. Malaysia's AirAsia Berhad has 49 per cent ownership in AirAsia India. pti

Jet Airways is in discussions with a few foreign airlines and private equity players for raising funds by selling stake, investment banking sources said.

The leading full service airline, where Abu Dhabi-based Etihad Airways already has 24 per cent strategic stake, has been looking to raise funds for expanding operations.

The airline has already appointed an investment banker to explore various options for raising fresh funds, including through possible stake sale, the sources said, requesting anonymity as discussions are at an exploratory stage.

The sources also said that initial discussions are going on with a few foreign carriers apart from some private equity firms.

Queries sent to a Jet Airways spokesperson remained unanswered.

Earlier this month, the airline neither confirmed nor denied reports that it was in exploratory talks with US-based Delta Air Lines to sell stake.

"We are committed to make appropriate disclosures in accordance with applicable regulations to avoid any speculative activities and state that there is no discussion or decision in the board which would require disclosure under Regulation 30 of Sebi (Listing Obligations and Listing Requirements) Regulations, 2015," Jet Airways had said in a filing to the stock exchanges on July 3.

Last week, Etihad Airways had told PTI that it is committed to the strategic partnership with Jet Airways that continues to be strong and healthy.

"We remain committed to our strategic partnership which has grown to become the largest carriers of international traffic to and from India with one in five passengers flying with Etihad Airways and Jet Airways.

"Together, we operate 257 services each week, each way between Abu Dhabi and 15 cities across India," an Etihad spokesperson had said.

Jet Airways flies to 65 destinations, including in the Middle East, Europe and North America. It has a fleet of 113 aircraft. The carrier has code share pacts with various international airlines, including Delta Air Lines, KLM Royal Dutch Airlines and Air France.

Amid tough business conditions, the airline saw its consolidated net profit slump nearly 95 per cent to Rs 23 crore for the three months ended March 2017.